Supply Chain Monitoring

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• Supply Chain Monitoring

Rickard Holm, Volvo Car Corporation
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Why is the Automotive Industry interested in
Supply Chain Management?

• Efficient built-to-order strategies and short
  time to delivery goals require fast, flexible and
  reliable supply networks
• inter-company visibility and transparency of
  relevant data
• inter-company business processes and
  collaboration for optimised decision taking
• Modern Supply Chain Management (SCM) concepts
  address important root-causes of current
  limitations in logistics networks
• Modern SCM is targeting to overcome the local,
  company-centric view by looking from a global
  perspective on value adding networks

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Supply Chain Monitoring (SCMo) - BackgroundThe
Odette SCM Group

• Established in March 2001
• Goal of Odette SCM Group is to identify and
  tackle the reasons for slow implementation of
  SCM-concepts in automotive industry
• bringing together the know-how and experience
• create recommendations (SCMo DCP)
• enable interoperability
• This presentation refers to the recommendation
  for the SCM building block Supply Chain
  Monitoring (SCMo)

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Participants SCMo Project

• Audi Roland Scheidler
• BMW Jan Kühner (replaced Manfred Wiltschek)
• DaimlerChrysler Andreas Basche
• Ford Thomas Lieb
• GM Angelika Gillmann, Peter Scherer (since
  2003)
• PSA Rob Exell
• Renault Didier Canals
• Volvo Rickard Holm
• VW Martina Hemken (till 11.2002)
• Bosch Oliver Merle
• Faurecia Michel Godin
• Siemens VDO Karlheinz Dietz
• Treves Hugues de Quercize
• Galia Jean-Pierre Le Bot
• Odette Int Patrick Lucchesi
• SMMT John Luscombe
• VDA Hans-Guenter Bodlien (till 11.2002)

OEMs
no direct participation in meetings in 2002
Suppliers
Project Leader
Organizations
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Supply Chain Monitoring (SCMo)One-Page-Summary

• Problem
• High stock levels, premium freight, frequent
  stock-out situations and high administrative
  efforts in difficult to manage supply networks.
• Long leadtime for demand information to reach x
  tier

• Basic Concept
• Generate automatically alerts, based on demand
  and inventory information.
• Synchronization of demand and inventories

• Result
• smooth and secure supply with minimal safety
  inventories in critical/difficult to manage
  supply networks
• optimized allocation in bottleneck situations

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Supply Chain Monitoring - Introduction
Positioning of SCMo

• Supply Chain Monitoring (SCMo) is a multi-level
  SCM concept supporting the fulfilment/execution
  process
• SCMo applications are an add-on to existing
  backend-system
• Key success factor for SCMo is to keep complexity
  low (e.g. number of parameters, detail of
  modelling)
• main benefits come from speed of information
  flow, cross-enterprise visibility and
  synchronisation
• only the critical part of the supply network is
  considered

SCMo is a complement to existing backend systems
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Supply Chain Monitoring - IntroductionFocus on
Critical Part of Supply Network
System Supplier
OEM
in general it is sufficient to concentrate on the
critical part of the supply network
OEM-level
Tier 1
Tier 2
Tier 3
Tier 4
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Supply Chain Monitoring - Introduction Basic
Information Flow in SCMo
SCMo applications are an add-on to existing
backend-systems (e.g. ERP), which remain the
leading systems for every organisation
SCMo provides all companies/users with customised
views
back-endsystemslevel
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????
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Tier n
Tier n-1
Tier n1
material flow
?? back-end system, ? SCMo-Screen
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Supply Chain Monitoring - Introduction
Initialisation Steps (1)

• Determination of the potentially critical part of
  the supply network
• Criteria high shortage risk and effect
• long lead and reaction times
• high total inventory cost
• frequent engineering changes
• creation of variants on low tier level
• bottleneck and/or allocation situation at a low
  tier level, etc.)

• Mapping of the structure of the selected network
  to the SCMo model (mathematical graph)
• Control points
• Transportation and production links

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Supply Chain Monitoring - Introduction
Network-Elements of SCMo Model
production

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Supply Network Representation in the SCMo-Model
Standard Scenario
Wi
warehouse inbound
Wo
warehouse outbound
control point
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Supply Chain Monitoring - Introduction
Initialisation Steps (2)

• Entry of parameters for the SCMo model
• organisational units (e.g. contact persons,
  organisation ID)
• control points (e.g. minimum/maximum inventory
  levels)
• production link (e.g. production lead-times, bill
  of material)
• transportation link (e.g. transportation
  lead-time, part number reference table)

• After completion of these steps, the SCMo system
  contains a model of the supply chain with all the
  necessary permanent/master data

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Supply Chain Monitoring - Introduction Example
for SCMo Model
housing
car model x
connector 1

wire-harness
plant 1
headlamp
connector 2
plant 2
glass lens
plant 3
H7 bulb
Tier 2
Tier 1
OEM
Tier 3
Organisational unit in supply network (node)
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Supply Chain Monitoring - Introduction Core of
SCMo

• Basically SCMo generates automatically alerts
  (e.g. by sending an email) if at least one actual
  inventory level in the supply network is too high
  or too low regarding the demand of the next
  days/weeks

• multi-level approach allows to take into account
  the cumulated inventory across the supply chain
  and enables a fast and transparent demand
  calculation
• every company will get early and clear signals
  whether to speed up or to slow down production
• high benefit especially for suppliers on lower
  tier levels, suffering most frombull-whip
  effect

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Supply Chain Monitoring - Introduction
Day-to-day business

• Update of inventory information (1 or more times
  per day) and demand information (close to
  real-time within the SCMo application)
• from decentralised backend-systems
• Alert generation when a monitored figure is going
  out of the predefined range (exception)
• Transparency allowing the user to easily
  understand the exceptional situation due to
  suitable presentation of the relevant data (alert
  board)
• Counter measures are documented (action item
  board) and monitored by a workflow concept

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Supply Chain Monitoring (SCMo)Industry Status

• First SCMo pilots started in 1999 (DC and Audi)
• Number of companies using SCMo in day-to-day
  business
• January 2003 ca. 100
• December 2003 ca. 250 (estimate based on agreed
  projects)
• Existing SCMo solutions have a satisfactory
  degree of maturity
• Next Steps Interoperability is needed for broad
  roll-out in the industry

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Supply Chain Monitoring (SCMo)Basic Principles
Objectives

• Integration of supply chain participants in the
  short / medium-term fulfillment/execution process
  
• exchange of demand and inventory information
• plus eventually status of production orders
  (future inventory)
• Transparency and visibility throughout selected
  parts of the supply network
• Fast demand calculation throughout the selected
  parts of the supply network
• eliminate a root cause of the bull-whip-effect
• Instant feedback on impact of decision for every
  participant of the supply network
• Optimize inventory in the selected parts of the
  supply network
• Avoid non-value adding activities in the selected
  parts of the supply network

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Supply Chain Monitoring - Introduction Benefits

• Smooth and secure supply with minimal safety
  inventories
• Increased flexibility and synchronisation of the
  supply network
• Reduction of non value adding cost (trouble
  shooting, administrative effort to manage and
  control material flow, etc.)
• Reduction of premium freight
• Avoidance of scrap due to obsolescence
  (engineering changes, end of production)

SCMo helps to better master critical / difficult
to manage supply networks
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Supply Chain Monitoring (SCMo) Comparison with
Demand Capacity Planning
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Basic Information Flow with centralized SCMo
Server

• Back-end systems in every organization keep
  dynamic data and static data (e.g. parameters)
  needed in the SCMo-Model
• These back-end systems need to update the central
  SCMo Server after every status change (e.g.
  inventory level for partnumber drops to 100
  units)

not suited for interoperability
????
????
????
Tier 2
Tier 1
OEM
back-end systems



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Basic Information Flow in SCMo Interoperability
Scenario

• Back-end systems in every organization keep
  dynamic data and static data of SCMoRecursive
  Model
• Back-end systems need to update the SCMo
  instances after every status change (e.g.
  inventory level for partnumber drops to 100
  units) gt EAI Information Flow

information flow
SCMo Instances
?
?
?
EAI Information Flow
back-endsystems
????
????
????



Tier n
Tier n-1
Tier n1
material flow
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Basic Information Flow in SCMo Interoperability
Scenario

• Categories of data interchange
• messages to create, change, administer etc. the
  SCMo-Model, i.e. parameters (clear ownership and
  user management)
• e.g. browser interface
• back-end system to SCMo instance messages
• company individual integration concepts
• SCMo instance to SCMo instance messages
• strict implementation of the Interoperability
  Standard necessary

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What would Telecommunication look-like without
Interoperability?
Conversational Partners
France Telecom
Deutsche Telecom
Service Provider
Vodafone
ATT
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Telecommunication is a good example for existing
Interoperability
Conversational Partners
France Telecom
Deutsche Telecom
Service Provider
Vodafone
ATT
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Why do we need Interoperability? Scenario with
Interoperability
companies that initiate a B2B solution integrate
their backend systems once (no change)
Business Partner A
Business Partner B
Business Partner C
Business Partner D
??
??
??
??
?
?
?
?
?
Company X
??
Interoperability is an efficient way to achieve
? full end-to-end integration (fast and
reliable data flow) and ? full B2B functionality
and business process
company X integrates its own backend systems once
?? Backend System (e.g. ERP), ? B2B instance
e.g. for SCMo or VMI
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Presentation for SCMoRecommendation Chapter
Overview
Philosophy of Supply Chain Management
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Introduction to SCMo
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Business Process Description
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Functionality
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Responsibilities
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Data Description
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Technical Aspects
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• Tack för uppmärksamheten!

Rickard Holm, Volvo Car Corporation